The crude oil industry in Nigeria is the largest industry. Oil provided about 90 per centum of foreign exchange net incomes and about 80 per centum of Federal gross and contributes to the growing rate of Gross domestic merchandise ( GDP ) . Since the Royal Dutch Shell discovered oil in the Niger Delta in 1956, exactly in Oloibiri, in Bayelsa province, the oil industry has been marred by political and economic discord mostly due to a long history of corrupt military governments, civil regulation and complicity of transnational corporations, notably Royal Dutch Shell.
Six oil companies- Shell, Elf, Agip Mobil, Chevron and Texaco dominates the oil industry in the state. Together, they hold some 98 % of the oil militias and runing assets. A scope of 50 others have minor involvements, some of which were late acquired. There are three major histrions in the Nigeria oil industry. They are: the ministry of crude oil resources, the Nigerian National Petroleum Corporation ( NNPC ) and its subordinates, the oil prospecting companies made up of the transnational companies and autochthonal companies together with their subordinates ( Baghebo, 2012 ) .
The operations and activities of crude oil are regulated by the Federal authorities of Nigeria ; she does this through the passage and execution of measures and Acts of the Apostless. Several measure and act have been passed to look into crude oil geographic expedition and development, they include among others: the crude oil act of 1969 ( CAP 350 ) , the oil grapevine act 1966, the land usage decree 1978 etc.
The recent 2012 crude oil industry measure is a comprehensive development design, below are the aims of the measure:
Make a contributing concern environment for crude oil operations ;
Enhance geographic expedition and development of crude oil resources in Nigeria for the benefit of the Nigeria people ;
Optimize domestic gas supplies, peculiarly for power coevals and industrial development ;
Establish a progressive financial model that encourages farther investing in the crude oil industry while optimising grosss accruing to the authorities ;
Establish commercially oriented and net income driven oil and gas entities ;
Deregulate and liberalise the downstream sector ;
Create efficient and effectual regulative bureaus ;
Promote transparence and openness in the disposal of the crude oil resources of Nigeria ;
Promote the development of Nigeria content in the crude oil industry ;
Protect wellness, safety ad the environment in the class of crude oil and
Attain such other aims to advance a feasible and sustainable crude oil industry in Nigeria ( The Petroleum Industry Bill, 2012 ) .
The elegant and robust aims of the measure if taken at face value means hope for the Nigerian people. But past experience of the falseness in accomplishing set aims by the Nigeria authorities leave many in incredulity. The inquiry that bugles the head are: is the crude oil measure a design for development in Nigeria? Will it be implemented to the letters when it becomes an act? Does the measure interpret hope for the Nigeria people? The above disputing inquiry is what this survey seeks to turn to. The remainder of the paper is organized as follows: subdivision two is a reappraisal of related literature. Section three is theoretical model underlying the survey. Analytical technique is contained in subdivision four. Methodology is in subdivision five. Section six is model appraisal. Interpretation of consequences is in subdivision seven while subdivision eight contains policy recommendations and decision.
2.0 Literature Review
Petroleum is no uncertainty a prevailing beginning of Nigeria ‘s gross and foreign exchange. The crude oil industry in Nigeria is divided into two chief sections. The upstream and the down watercourse sectors. The upstream refers to activities such as geographic expedition, production and bringing to an export terminus of rough oil or gas. The down watercourse on the other manus encompasses activities like burden of rough oil at the terminus and its user particularly transit, supply trading, polishing distribution and selling of crude oil. ( Dominic 1999 )
Previous surveies on the Nigeria economic system in the last decennary show that the crude oil industry has been playing a dominant function and occupies a strategic place in the economic development of Nigeria ( Azaiki el al ( 2007 ) . This is evidenced by the entire oil gross generated into the Federation Account from 2000 to 2009 which amounted to N34.2 trillion while non-oil was N7.3 trillion, stand foring 82.36 % and 17.64 % severally. The average value of oil gross for the 10 twelvemonth period is N3.42 trillion compared to non-oil gross at N732.2 billion ( CBN 2011 ) . Further grounds was 10 twelvemonth ‘s mean rough oil and condensates production of 832,866,752.1 barrels from 2000 to 2009. The importance of rough oil to the economic development of Nigeria can non be over emphatic, Nigeria gained an excess $ 390 billion in oil-related financial gross between 1971 and 2005 ( CBN 2011 ) .
Unfortunately, the economic system has been bedeviled by sustained underdevelopment evidenced by hapless human developmental and economic indices including hapless income distribution, combativeness and oil force in the Niger Delta, endemic corruptness, unemployment, comparative poorness ( Nwezeaku, 2010 ) . Irrespective of Nigeria ‘s immense oil wealth, the state has remained one of the poorest in the universe. In peculiar, the Niger Delta which produces the oil wealth that accounts for the majority of Nigeria ‘s net incomes has besides emerged as one of the most environmentally debauched parts in the universe evidenced from the World Wildlife Fund study released in 2006 ( Ekaette,2009 ) . The jobs with Nigerian economic system have been traced to failure of consecutive authoritiess to utilize oil gross and extra petroleum oil income efficaciously in the development of other sectors of the economic system. Over all, there has been hapless public presentation of national establishments such as power, energy, route, transit, political relations, fiscal systems, and investing environment have been deteriorating and inefficient. Harmonizing to Odularu ( 2008 ) , outside of the energy sector, Nigeria ‘s economic system is extremely inefficient. Furthermore, human capital is developing. Nigeria ‘s economic system is fighting to leverage the state ‘s huge wealth in fossil fuels in order to displace the lay waste toing deficiency that affects about 57 per centum of its population. In 2009, relentless rising prices and environmental debasement led to want of agencies of support and other socio-economic factors to the people of Niger Delta which is the major oil bring forthing part in Nigeria. Despite the fact that petroleum oil has been the beginning of Nigerian economic system, the economic system is faced with high rate of unemployment, broad spread oil spillage, increasing hapless criterion of life, low per capita income and high rate of rising prices which ( Nwezeaku, 2010 ) .
Bawa and Mohammed ( 2007 ) assert that “ Nigeria with all its oil wealth has performed ill, with GDP, per capita income today non higher than at independency in 1960 ” .This means that an mean Nigerian was better off before independency in 1960. Bawa and Mohammed acknowledged hapless public presentation of Nigeria ‘s economic system but did non supply any empirical grounds or per centum figures by manner of hypotheses proving and thereby corroborating the fact that some of their plants must hold been based on premises that can non be statistically verified and generalized ( Baridam, 2008, and Eromosele, 1997 ) .
3.0 Theoretical Model
This subdivision provides a compendious sum-up of the theoretical literature on the nature of the relationship between resource copiousness and development. The intent is to first show a theoretical history of the Benign position on the issue of resource copiousness and economic advancement. Then, the assorted channels through which oil may impact growing and development follow each position.
The Benign Perspective: Natural Resource Abundance Beneficial to Growth
The conventional wisdom before the late 80s was that natural resources had positive consequence on development ( See Baghebo, 2012, Rosser, 2006 ) . This position was shared by many development theoreticians and neo-liberal economic experts until the revival of new position in the 80s that claimed that natural resource abundant was non a approval to the developing states. The basic statement of the benign position is that natural resource gifts would help the developing states to pass through from the phase of underdevelopment to that of industrial ‘take-off ‘ , as obtained in such states as Britain, the United States and Australia. Basically, the assorted channels through which copiousness of natural resources like oil sector could lend to the economic systems of the oil manufacturers have been identified in the literature. One, the immense grosss from oil enables the authoritiess of the oil bring forthing states to pass and put massively without resort to revenue enhancement. Grosss from oil, if decently utilized, could function as a “ large push ” for development. This channel is particularly of import for developing states where dearth of capital frequently constitutes a major hinderance to growing and development. Furthermore, the immense foreign exchange net incomes from oil exports, apart from being used for importing natural stuff, intermediate and capital goods for production in the non oil sectors could every bit help in hiking the foreign militias of the oil exporting states. The accretion of foreign militias can be seen as collateral which the oil bring forthing economic systems can utilize in pulling foreign investing ( Dooley et al. , 2003 ) .
Furthermore, such retention can be seen as a dearly-won self-insurance scheme to smoothen exposure impacts of domestic and foreign dazes and to step in in the foreign exchange market. Oil sector can besides lend to development in the oil rich economic systems through proviso of intermediate inputs to the remainder of the economic system. These intermediate inputs include rough oil, gas and liquid provender stocks, every bit good as oil and gas into the refinement, petrochemical and electricity and energy intensive industries severally ( Al-Moneef, 2006 ) . This channel is critical to growing and development in the development states. For case, many end products of the petrochemical industries are important to the development of the fabrication industries. Likewise, proviso of electricity and other basic public-service corporations at favorable monetary values is of considerable importance in the procedure of turning and fostering the service and fabrication bomber sectors. Growth and development in the oil rich economic systems could be enhanced through the market part from oil. The market part relates to the demand by oil sector for assorted inputs of goods and services provided by local beginnings.
By and large, as a consequence of oil production, refinement and distribution, there is inclination for oil sector-related services to jump up. These oil sector-related services will non merely provide chance for employment but besides serve as beginnings of net incomes for the operators. Asides from the market part, the foreign investing ( FDI ) consequence is really of import. Oil activity frequently leads to inflow of foreign resources such as FDI and portfolio investing. Indeed, the majority of FDI into bulk of the states that export oil are concentrated in the oil sector. The assorted channels through which FDI impacts growing and development in the receiver states have been extensively discussed in the literature. Specifically, FDI inflows to developing states non merely assist in increasing their stock of capital but may besides help in hiking labour productiveness and incomes in the host state. Consequently, the degrees of end product, employment creative activity, and possible revenue enhancement grosss are enhanced in the host states ( Ramirez, 2006 ) . Empirically, few surveies have been have provided consequences in support of the benign position on the impact of natural resources on economic growing and development. Some of these surveies non merely reported that resource copiousness had positive impact on growing and development but besides found that resource dependance had no inauspicious impact on growing.
Several empirical surveies have confirmed the natural resource expletive hypothesis. Some other grounds why resource-rich states might endure resource expletive are reduced returns to human investings, precipitated by natural resource development ( Gylfason, 2001a ) and hapless economic direction that leads to inefficient resource allotment ( Rosser, 2006 ) . All in all, while there are strong theoretical evidences to surmise a wide correspondence between natural resource copiousness particularly oil and low growing, the nature of the linkage is neither direct nor simple. Empirical literature has non provided conclusive reply to whether abundant natural resource is a expletive or approval. Even among surveies that claimed the expletive of natural resources really exist, there is no understanding on what precisely drives the expletive of the natural resources and on how it precisely plays out. This explains why farther research should be focused on the causal nexus between natural resource copiousness and growing in the resource rich economic systems.
Looking at the aims of the measure and the re-structuring of how crude oil issues will be handled in the measure, it is just to reason that the measure is merely what Nigerians need to deduce the needful benefit from crude oil resources, but such decision may non keep Waterss, clip merely will state if the measure will interpret into the intended intent in world.
4.0 Analytic technique
The research work made usage of the econometric attack in gauging the relationship between oil export, foreign direct investing, corruptness index, external debt and the Nigerian economic growing. The dependent variable is existent Gross Domestic Product while the independent variables are oil export, FDI, external debt, index of corruptness perceptual experience. The Ordinary Least Square ( OLS ) technique was used in obtaining the numerical estimations of the coefficients in different equations utilizing e-views. The OLS method is chosen because it is the best linear indifferent calculator. Here, Gross Domestic Product ( GDP ) was used as the placeholder for the degree of economic activities. The appraisal period screen 1980 to 2011.
The information for this survey was obtained chiefly from secondary beginnings, peculiarly from Central Bank of Nigeria ( CBN ) Statistical Bulletin, transparence international Agency.
We adopt four phase methodological analysis in this survey. First the stationary position of the information series was examined utilizing Augmented Dickey Fuller unit root trial. This is followed by Johansen cointegration trial. The 3rd phase is the penurious mistake rectification method and the Forth phase is Granger causality trial.
Research design is the construction and scheme for look intoing the relationship between the variables of the survey. The research design adopted for this work is the experimental research design. The ground is that experimental research design combines the theoretical consideration with empirical observation. It enables a research worker therefore to detect the effects of explanatory variables on the dependant variables
6.0 Model appraisal
The functional signifier of the theoretical account for the survey is specified as follows:
GDP = F ( Oil, CI, FDI, and EXDEBT ) aˆ¦aˆ¦ ( 1 )
The multivariate specification of the theoretical account is given therefore:
GDP = ao + a1OIL+ a2CI+ a3EXDEBT+ a4FDI+ Aµaˆ¦aˆ¦ . ( 2 )
GDP= Gross Domestic Product
Oil= Oil Revenue
CI= Corruption Perception Index
FDI= Foreign Direct Investment
EXDEBT= External Debt
Aµ= mistake term
The apriori outlooks are:
ao & gt ; & lt ; 0, a1 & gt ; & lt ; 0, a2 & lt ; 0, a3 & lt ; 0, a4 & gt ; 0
8.0 INTERPRETATION OF RESULT
To avoid specious and absurd arrested development consequence on the clip series informations, the Augmented Dickey Fuller ( ADF ) trial for unit root was carried out to determine the stationary position of the information series. This is shown in table 1. All the variables in the theoretical account were incorporate variables but attain stationarity after first and 2nd differences. GDP, CI, attain stationary after first differences, while FDI, OIL and EXDEBT became stationary after 2nd difference. The void hypothesis of non stationarity of the variables in the theoretical account is rejected after differencing at the 5 per centum degree of significance.
The following measure is to carry on the Johansen cointegration trial. The consequences as shown in table 2 reveal the being of four cointegrating equations at the 5 per centum degree of significance. The consequences indicate that long tally equilibrium relationship exist among the variables in the theoretical account and are hence regarded as policy variables. The identified cointegrating equations are so used as mistake rectification term in the mistake rectification theoretical account. The series so organize the mistake rectification variable.
The short tally dynamic accommodations required to set up a stable long tally equilibrium relation among the variables in the theoretical account ( as presented in Table 3 ) was established utilizing the mistake rectification method. The negative coefficient of the ECM value confirms the averment that the variables in the theoretical account are cointegrated. The statistically important coefficient of the ECM implies disequilibrium in the long tally. The coefficient of the ECM is the velocity of accommodation and it shows that about 31 per centum of the disequilibrium in the long tally is corrected in the short tally. It besides implies that about 31 per centum of the old twelvemonth ‘s dazes adjust to equilibrium in the current twelvemonth. It besides means slow velocity of accommodation. The penurious consequences as shown in table 3. FDI impact positively and significantly on Real GDP with a coefficient of 50.15043. This implies that a unit alteration in FDI consequences to 50.15043 addition in GDP. This consequence is consistent with several studied that FDI is important for the economic transmutation of developing states where savings- investing and foreign exchange spreads exist or faced capital scarceness jobs. FDI satisfy apriori outlooks.
Oil gross impacts negatively and significantly on Real GDP. A unit alteration in OIL gross brings about a autumn in GDP. The consequences indicate that a unit alteration in OIL gross consequence to 1.362996 decrease in GDP. This means that the Dutch disease phenomenon exist in Nigeria. This negates apriori outlooks
The impact of Corruption index on Real GDP is negative and statistically undistinguished. The consequences support the negative impact of OIL gross on Real GDP. The corruptness dirt that bedevil the Nigeria OIL industry which has called for the passage of a jurisprudence to transform the OIL industry, becomes necessary. At the clip of composing this article it was a Bill still under Parliamentary examination. Corruptness has accounted greatly to the underdevelopment of most OIL rich economic systems of the Contemporary World. CI conforms with apriori outlooks.
Corruptness in Nigeria has become so permeant that we can nickname the economic system a system of pirate capitalist economy. During the 2nd Republic, Nigeria has lost consecutively, every bit much as N12.5 billion in the Oil industry through fraud, affecting the illegal sale of Nigerian petroleum oil and refined merchandises. The mob perpetrators involved Nigerians and aliens. The Irikefe Probe panel that looked into the allegedly missing N2.8 billion oil money was told of how some ships lifted oil without clearance from the inspectorate division of the Nigerian National Petroleum Corporation ( NNPC ) . A Grecian ship MV trans was reported to hold illicitly lifted 2,300 metric metric tons of Nigerian petroleum oil from Daves Island position in Port Harcourt on September 12, 1983, merely to be arrested in Italy. The value of the stolen lading was put at $ 1.3 million ( Baghebo, 2011 )
External debt ( EXDEBT ) impacts positively but insignificantly on Real GDP with snap of 0.331568. This means that a one per centum alteration in EXDEBT consequences to 0.331568 addition in Real GDP. The consequences indicate that there is an betterment in the direction of external debts in Nigeria. The consequence negates apriori outlooks.
The adjusted R square of 0.760416 agencies that about 76 per centum fluctuations in the dependant variable RGDP is explained jointly by all the regressors in the theoretical account go forthing about 24 per centum for the stochastic term. The explanatory power of the theoretical account is high and is a good tantrum. The F statistic is extremely important demoing the joint significance of all the variables in the theoretical account.
The standard mistake value indicates that about two-third of the clip, the expected value of the dependant variable will be within 1788214 of the existent value. The Durbin Watson statistic of 1.842628 is within the credence part. This means the absence of consecutive correlativity. The Akaike and Schwarz information standards indicates that the theoretical account is right specified.
The statistically important coefficient of the ECM mean that the theoretical account passes the normalcy trial, The theoretical account is usually distributed holding the features of best additive un prejudice calculator. We there reject the void hypothesis that the mistake footings are non usually distributed. The high values of the adjusted R square and the F statistic implies that that the theoretical account passes the goodness of tantrum and diagnostic trial.
The Granger causality trials as shown in Tables 4. shows that there exists a bi-direction casualty between GDP and EXDEBT every bit good as OIL and EXDEBT while a uni-directional casualty exist between CI and EXDEBT ; FDI and CI ; FDI and EXDEBT ; FDI and GDP ; AND FDI and OIL.
8.0 Policy Recommendations and Decision
Nigeria has achieved ill fame in the universe crude oil concern. Although its entire oil production end product is merely an norm of 2.5 million barrel per twenty-four hours ; agitations for local engagement and environmental concerns in its oil bring forthing countries frequently adversely affects the planetary oil and gas markets. Among all OPEC members, Nigeria is possibly the lone state that relies so to a great extent on foreign houses for services in its crude oil industry. Crude oil refinement is its chief downstream operation. Yet, it imports at least 43 % of its gasolene demands. There are low petrochemicals production due to low capacity uses and inaccessibility of the needed engineering. Again, importing is necessary to run into the instead stunted domestic petrochemicals demands. Nigeria is among the worst gas flaring states. Up boulder clay 2001, 51 % of the gas produced was flared. The trust on the foreign work forces for services and productions of gasoline/chemicals, the obvious environmental and economic deductions of gas flame uping conveying into inquiry the long term sustainability of the state ‘s crude oil and petrochemical industry.
For Nigeria to rectify this anomalousness, derive more benefits from its oil and gas resources and quiet down local agitations, the crude oil industry measure is important. And due attending should be given to it. The importance of oil to the growing of the Nigeria economic system can non be undermined. If the crude oil industry measure is implemented as pencilled down, it will interpret to development in Nigeria. Government and stakeholders should non handle the measure as a political one, but should see it as a development design. This will farther turn to the jobs of corruptness, and the negative impact of Oil gross on GDP. The deduction of this is the concentration of the wealth of the state in the custodies of few Nigerians while bulk suffers in low poorness.